Overview of Colorado Taxes
Colorado is home to Rocky Mountain National Park, upscale ski resorts and a flat income tax rate of 4.5%. Aside from state and federal taxes, Centennial State residents who live in Aurora, Denver, Glendale, Greenwood Village or Sheridan must also pay local taxes.
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Colorado Paycheck Calculator
Colorado Paycheck Quick Facts
- Colorado income tax rate: 4.50%
- Median household income: $84,954 (U.S. Census Bureau)
- Number of cities that have local income taxes: 5
How Your Colorado Paycheck Works
If you are a Colorado resident, your employer will withhold taxes from every paycheck you get. These taxes go to the IRS to pay for your federal income taxes and FICA taxes. FICA taxes go toward Social Security and Medicare. The amount withheld for federal taxes depends on the information you’ve filled out on your Form W-4. Remember that you need to fill out a new W-4 when you start a new job or if you want to make changes (for example, after having a child or getting married).
Over the last few years, the IRS has made multiple changes to the W-4. The new form no longer asks for total allowances; but it requires you to enter dollar amounts for income tax credits, non-wage income, itemized and other deductions and total annual taxable wages. The W-4 now also features a five-step process that allows filers to enter personal information, claim dependents and indicate any additional jobs or income. For the most part, these updates affect those adjusting their withholdings or changing jobs.
One big factor affecting your paycheck taxes is your marital status and whether you decide to file jointly or separately from your spouse. Filing as head of household will also change things. Any Coloradans who are common-law couples also have the option to file jointly.
Claiming dependents might affect your pay as well. Naturally, the frequency of your pay will also affect the size of your paycheck. The more frequently you get paid, the smaller each paycheck will be.
Coloradans' income is taxed at a flat rate of 4.50% of their taxable income, regardless of your income bracket or marital status. If you work in Aurora, Denver, Glendale, Sheridan or Greenwood Village, you will also have to pay local taxes. These taxes are also flat rates.
If you work in Aurora, $2 is taken out of your pay every month if you earn over $250 in a calendar month. In Denver, you’ll pay $5.75 monthly if you make more than $500 in a calendar month. Employers in Greenwood Village will take out $2 from your paycheck every month if you earn more than $250 in a calendar month. For Glendale residents, the tax rate is $5 a month if you earn at least $750 during a calendar month. In Sheridan, you'll be taxed $3 per month regardless of your wages.
Colorado residents who work in another state should be aware of the credit for tax paid to another state. If you live in Colorado and your income is taxable in another state, you may qualify for a credit for taxes paid to the other state.
If you’re in the military on active duty, you might not have state taxes withheld. To qualify you will need to make sure that you establish Colorado as your state of legal residence. You can do that by registering to vote in Colorado or purchasing property there. Once you do that, any money you get from being in active service doesn’t count as taxable income when figuring out Colorado income taxes (meaning you won’t be taxed in Colorado for that amount).
A financial advisor can help you understand how taxes fit into your overall financial goals. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
How You Can Affect Your Colorado Paycheck
You need to fill out a new W-4 whenever you start a new job, but you can also fill one out at any time. If you do regularly owe money when you pay your taxes, consider asking your employer to withhold more taxes from your paychecks. When filling out a new W-4, simply write in the dollar amount you want withheld. For example, if you want $60 taken out of each paycheck on top of the dollar amounts you've entered for the tax year, then all you need to do is write that amount on the correct line on the W-4. This means smaller paychecks, but think of it as paying more of your taxes over time so that you don’t have to pay a huge lump sum every year. Using a paycheck calculator like ours will help you see how your paycheck changes when you withhold more or less money.
Finally, one more way you can tweak your paycheck is to modify your pre-tax contributions. These lessen your taxable income and may even push you into a lower tax bracket. If your employer offers such benefits, think about putting more into things like a Health Savings Account, a commuter program or other types of flexible spending accounts. You might also want to increase how much you’re putting into your employer-sponsored retirement account, like your 401(k) or 403(b).
